What type of country restricts international capital movements?

This chapter explores the question of why some countries might wish to set up barriers to the international movement of capital. Much recent literature on international capital movements concentrates on three related issues — quantifying countries' net external asset positions, ¹ why so little capital moves from rich to poor countries, ² and whether capital mobility is beneficial or harmful in view of its various wider effects. ³ Exactly why some countries might not wish to participate in the globalization game has been less discussed. This is the main topic to be explored here. A theoretical preamble, in section 2, argues that countries in this position are likely to display one or more of the following characteristics: relatively high populations; intermediate levels of GDP per head, neither high nor low; and a strong penchant for protecting seignorage. These propositions are then tested against an index of restrictions on external transactions for a large number of countries, which is described in section 3. Empirical results are found to be consistent with the hypotheses.